Is Lerøy Seafood Group ASA (OB:LSG) Potentially Undervalued?

While Lerøy Seafood Group ASA (OB:LSG) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the OB over the last few months, increasing to kr54.80 at one point, and dropping to the lows of kr40.12. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Lerøy Seafood Group's current trading price of kr41.24 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lerøy Seafood Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Lerøy Seafood Group

What Is Lerøy Seafood Group Worth?

Great news for investors – Lerøy Seafood Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.98x is currently well-below the industry average of 13.2x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Lerøy Seafood Group’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Lerøy Seafood Group generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 5.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Lerøy Seafood Group, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since LSG is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on LSG for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LSG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 1 warning sign for Lerøy Seafood Group you should be aware of.

If you are no longer interested in Lerøy Seafood Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.